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Is Yahoo`s Smart Ads a Smart Idea?

In Yahoo’s current “damned if you do, damned if you don’t” situation, one can wonder about the timing for trotting out Smart Ads. Is it a real advance in search advertising? And even if it is, will it save the search engine? In this article, I’ll look at Smart Ads and consider it in the context of where search is, and where it’s going.

Smart Ads takes advantage of the fact that Yahoo has a huge audience – it’s one of the most-visited sites on the web – and that this audience checks out various areas of Yahoo’s site. It’s easy enough to start by checking your Yahoo Mail, cruise over to Yahoo News, find out the forecast in Yahoo Weather…you get the idea. Users have cookies that follow them around, which is how Yahoo knows about its visitors.

So how does this play into Yahoo Smart Ads? Let’s look at the example that Yahoo gives in its demo of the technology. Joe User lives in Los Angeles, but loves his online casino sites. One day he searches for Las Vegas deals, perhaps dreaming of a visit to Sin City. Later, when he’s looking up Yahoo Weather, he sees a display ad that plays to this interest, telling him about cheap flights to Las Vegas.

This is behavioral targeting, also known as behavioral advertising; I’ve discussed it before on SEO Chat. It can be very effective and perhaps relatively cheap for advertisers. According to Yahoo’s press release, the SmartAds platform “allows advertisers and agencies to design a single set of individual creative components, provide Yahoo! with the artwork and a feed to their entire database of offers, then allow Yahoo!’s SmartAds technology to automatically generate the hundreds – if not thousands – of unique ad combinations based on those components.”

So you can not only appeal to Joe User with dreams of a Vegas vacation, but also Ellie who wants to escape Seattle for sunny Florida, Arthur from Idaho who’s curious about New York’s big city lights, Martin from Minnesota who’s always had a hankering to play cowboy in Texas…you get the idea. I’m using the travel examples mainly because Yahoo is starting its roll out of Smart Ads with its travel industry advertisers in the U.S. It’s not a bad place to start; I just hope the search engine is prepared to address some possible glitches in the approach that may not be obvious at first glance.

{mospagebreak title=Search Schizophrenia}

Gord Hotchkiss has correctly pointed out that the Holy Grail of search, if it is to move ahead, is disambiguating intent. He has also observed, when talking about search becoming more personalized, that “Whatever happens on the organic site will roll over to the sponsored side…It will drive everything.” Though behavioral targeting has been around for a while, in the light of Yahoo’s latest move – and the fact that Hotchkiss pointed this out about a month before Yahoo came out with Smart Ads – those words look almost prescient.

But disambiguating search is a Holy Grail for a reason. Mark Simon makes that point when he wonders whether Yahoo’s Smart Ads are really efficient. “A good number of the online searches I do – perhaps even the majority – are about search. But I’m not looking to hire a search firm. And that’s a real problem for behavioral targeting programs like Yahoo’s new Smart Ads,” he points out.

In other words, just because a user is searching for something online doesn’t mean they’re interested in buying something related to their search. Simon gives one example of this, but it’s actually much worse than that. It’s very easy to be logged into Yahoo at home and at work — after all, who hasn’t checked their personal web email at work? But do you perform the same kinds of searches in both places?

If you’re anything like me, I’m guessing you don’t. For example, at work, I do research for articles related to our SEO Chat, Dev Hardware, and Web Hosting web sites. I also look up computer books on Amazon.com for tasks related to the publishing of chapter reprints on three of our other sites. That’s all well and good – but once I get off work, I don’t want to hear anything about computer programming, and I could do with a little less discussion of SEO and computer hardware, thank you very much. I have many interests that are in no way related to my work; as the T-shirt quote goes, “I have many talents, but I only get paid for three of them.”

It gets even worse when two people share the same account. I’d never share an account with anyone, but I know one couple that does share a Yahoo email account, and their interests strongly diverge in certain areas. At the risk of sounding clichéd, I couldn’t imagine him showing an interest in knitting, and I couldn’t imagine her showing an interest in power tools – except maybe as a gift. Of course, that shows yet another area where behavioral targeting can fail, which is when a user shops for a gift for a friend or loved one with very different interests from their own. If I look for an advanced book on genealogy for my friend, I do not want to keep seeing ads for books on the same or similar subjects when I’m doing other things online.

{mospagebreak title=Yahoo in a Bind}

One point that lends urgency to this role out of Yahoo Smart Ads is that Yahoo is in a real bind – the “damned if you do, damned if you don’t” situation that I mentioned in the introduction. Yahoo has been fighting the Google juggernaut, angry stockholders, and advertising technology that has been more hindrance than help at times, all while undergoing a restructuring that saw it sacrifice its CEO of six years in the hopes of finding its way again. Show me any company that can do all that and not bite its nails every time it releases a product that could have a positive effect — or not — on its revenues.

Make no mistake, Yahoo needs its Smart Ads to be successful, and fairly quickly. Don’t believe me? Look at Panama. Mark Simon does a good job of explaining the undeserved hatchet job that the venerable search engine was getting over its new advertising platform, widely agreed to be an improvement over the old system. “Though a platform of that complexity takes the better part of a year to ramp up to full steam, plenty of industry analysts were ready to voice disappointment within a few months, and Yahoo’s reputation was hurt by the criticism,” he noted.

So does that mean that Yahoo should be aggressive in its pursuit of the bottom line? Well, any change it makes or new product it brings out will probably have a few difficulties if it moves too hastily. Now Google may trot out new products in beta all the time, but Yahoo doesn’t quite have that kind of maneuvering room. Remember those angry stockholders? Wall Street is putting everything Yahoo does under a magnifying glass. In such a climate, even a minor slip from the search engine will look far bigger than it actually is.

If Yahoo has to bring out a new product, Smart Ads is a good move. The company has been accused of not streamlining its product and service offerings for consumers. As Simon notes, “Smart Ads ties together content and search, and shows the world just how Yahoo plans to come out swinging from its slump.” But will it be enough to help the search engine start turning things around?

{mospagebreak title=Will it Work?}

This is good timing for Smart Ads for another reason: many users are starting to get more comfortable with personalized search. Search personalization may be subtle at first – and sometimes off-target, as I pointed out earlier. But the search engines have a very good reason to make it work better: it will improve their own bottom lines.

If a search engine learns how to improve its personalization, it will automatically improve the targeting of its ads. If it can take that improved targeting off-site, or to other areas of its network, as Yahoo is trying to do with its Smart Ads, it should show much higher click-through rates for its ads. In its press release for Smart Ads, Yahoo said that “In testing conducted on Yahoo! FareChase, Smart Ads generally resulted in click through rates of two to three times higher than static, non-customized display ads using the same targeting and placement.”

Those aren’t bad numbers. But the task of matching users to ads based on search and browsing behavior continues to be a challenge. On the other hand, the fact that Yahoo is actually beating Google to the behavioral targeting arena, and has such a huge amount of user data to draw on, can potentially give them a real edge. Todd Teresi, senior vice president of display marketplaces at Yahoo, called it “scalable one-to-one marketing.” Keep your fingers crossed for Yahoo; this just might be the future of search in general, and search advertising in particular.